Method and system for digital watermarking

ABSTRACT

A method for applying a digital watermark to a content signal is disclosed. In accordance with such a method, a watermarking key is identified. The watermarking key includes a binary sequence and information describing application of that binary sequence to the content signal. The digital watermark is then encoded within the content signal at one or more locations determined by the watermarking key.

RELATED APPLICATIONS

This application claims the benefit of: U.S. patent application No.08/587,944 filed Jan. 17, 1996, now U.S. Pat. No. 5,822,432; U.S. patentapplication Ser. No. 08/587,943, filed Jan. 17, 1996, now U.S. Pat. No.5,745,569; and U.S. patent application Ser. No. 08/365,454, filed Dec.28, 1994, now, U.S. Pat. No. 5,539,735.

This application is related to patent applications entitled“Steganographic Method and Device”, Ser. No. 08/489,172 filed Jun. 7,1995 (issued as U.S. Pat. No. 5,613,004 on Mar. 18, 1997); “Method forHuman-Assisted Random Key Generation and Application for DigitalWatermark System”, Ser. No. 08/587,944 filed on Jan. 17, 1996 (issued asU.S. Pat. No. 5,822,432 on Oct. 13, 1998); “Method for Stega-CipherProtection of Computer Code”, Ser. No. 08/587,943 filed on Jan. 17, 1996(issued as U.S. Pat. No. 5,745,569 on Apr. 28, 1997); “DigitalInformation Commodities Exchange”, Ser. No. 08/365,454 filed on Dec. 28,1994 (issued as U.S. Pat. No. 5,539,735 on Jul. 23, 1996) which is acontinuation of Ser. No. 08/083,593 filed on Jun. 30, 1993 (issued asU.S. Pat. No. 5,428,606 on Jun. 27, 1995); and “Optimization Methods ForThe Insertion, Protection, and Detection of Digital Watermarks inDigital Data”, Ser. No. 08/677,435, filed on Jul. 2, 1996 (issued asU.S. Pat. No. 5,889,868 on Mar. 30, 1999). These related applicationsare all incorporated herein by reference, as if fully stated herein.

This application is also related to U.S. Pat. No. 5,428,606, “DigitalInformation Commodities Exchange”, issued on Jun. 27, 1995, which isincorporated herein by reference, as if fully stated herein.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of pending U.S. patent applicationSer. No. 11/649,026, filed Jan. 3, 2007, which is a continuation of U.S.patent application Ser. No. 09/545,589, filed Apr. 7, 2000, now U.S.Pat. No. 7,007,166, which is a divisional pursuant to 37 C.F.R. §1.53(b) of U.S. patent application Ser. No. 08/674,726, filed Jul. 2, 1996,now U.S. Pat. No. 7,362,775. The previously identified patents and/orpatent applications are hereby incorporated by reference, in theirentireties, as if fully stated herein.

BACKGROUND OF THE INVENTION

Digital watermarks exist at a convergence point where creators andpublishers of digitized multimedia content demand localized, securedidentification and authentication of that content. Because piracy isclearly a disincentive to the digital distribution of copyrightedcontent, establishment of responsibility for copies and derivativecopies of such works is invaluable. It is desirable to tie copyrights,ownership rights, purchaser information or some combination of these andrelated data into the content in such a manner that the content mustundergo damage, and therefore reduction of its value, in order to removesuch data for the purpose of subsequent, unauthorized distribution,commercial or otherwise. Legal precedent or attitudinal shiftsrecognizing the importance of digital watermarks as a necessarycomponent of commercially-distributed content (audio, video, game, etc.)will further the development of acceptable parameters for the exchangeof such content by the various parties engaged in such activities. Thesemay include artists, engineers, studios, INTERNET access providers,publishers, agents, on-line service providers, aggregators of contentfor some form of electronic delivery, on-line retailers, individuals andother related parties that participate in the transfer of funds orarbitrate the actual delivery of content to intended recipients.

There are a number of hardware and software approaches that attempt toprovide protection of multimedia content, including encryption,cryptographic containers, cryptographic envelopes or “cryptolopes,” andtrusted systems in general. None of these systems places control ofcopyrights in the hands of the content creator as content is created.Further, none of these systems provide an economically feasible modelfor the content to be exchanged with its identification embedded withinthe signals that comprise the content. Given the existence of over 100million personal computers and many more non-copyright-protectedconsumer electronic goods (such as audio clips, still pictures andvideos), copyrights are most suitably placed within the digitizedsignals. Playing content is necessary to determine or “establish” itscommercial value. Likewise, advertising and broadcast of samples orcomplete works reinforces demand for the content by making its existenceknown to market participants (via radio, television, print media or eventhe INTERNET).

Generally, encryption and cryptographic containers serve copyrightholders as a means to protect data in transit between a publisher ordistributor and the purchaser of the data. That is, a method of securingthe delivery of copyrighted material from one location to another byusing variations of public key cryptography or other cryptosystems.Cryptolopes are suited specifically for copyrighted text that is timesensitive, such as newspapers, where intellectual property rights andorigin are made a permanent part of the file.

The basis for public key cryptography is provided, for example, in anumber of patented inventions. Information on public-key cryptosystemscan be obtained from U.S. Pat. No. 4,200,770 to Hellman et al., U.S.Pat. No. 4,218,582 to Hellman et al., U.S. Pat. No. 4,405,829 to Rivestet al., and U.S. Pat. No. 4,424,414 to Hellman et al. Digitally-sampledcopyrighted material is a special case because of its long term valuecoupled with the ease and perfection in creating copies and transmittingby general purpose computing and telecommunications devices. In thisspecial case of digitally-sampled material, there is no loss of qualityin derivative works and no identifiable differences between one copy andany other subsequent copy.

For creators of content, distribution costs may be minimized withelectronic transmission of copyrighted works. Unfortunately, seekingsome form of informational or commercial return via electronic exchangeis ill-advised, absent the establishment of responsibility of specificcopies or instances of copies or some form of trusted system in general.

FIELD OF INVENTION

The present invention is related to a method and system for applying adigital watermark to a content signal.

With the advent of computer networks and digital multimedia, protectionof intellectual property has become a prime concern for creators andpublishers of digitized copies of copyrightable works, such as musicalrecordings, movies, and video games. One method of protecting copyrightsin the digital domain is to use “digital watermarks”. Digital watermarkscan be used to mark each individual copy of a digitized work withinformation identifying the title, copyright holder, and even thelicensed owner of a particular copy. The watermarks can also serve toallow for secured metering and support of other distribution systems ofgiven media content and relevant information associated with them,including addresses, protocols, billing, pricing or distribution pathparameters, among the many things that could constitute a “watermark.”For further discussion of systems that are oriented around content-basedaddresses and directories, see U.S. Pat. No. 5,428,606 Moskowitz. Whenmarked with licensing and ownership information, responsibility iscreated for individual copies where before there was none. Moreinformation on digital watermarks is set forth in “Steganographic Methodand Device”—The DICE Company, U.S. application Ser. No. 08/489,172, nowU.S. Pat. No. 5,613,004, the disclosure of which is hereby incorporatedby reference in its entirety, as if fully stated herein. Also,“Technology: Digital Commerce”, Denise Caruso, New York Times, Aug. 7,1995 “Copyrighting in the Information Age”, Harley Ungar, ONLINEMARKETPLACE, September 1995, Jupiter Communications further describedigital watermarks.

Additional information on other methods for hiding information signalsin content signals is disclosed in U.S. Pat. No. 5,319,735—Preuss et al.and U.S. Pat. No. 5,379,345—Greenberg.

Digital watermarks can be encoded with random or pseudo-random keys,which act as secret maps for locating the watermarks. These keys make itimpossible for a party without the key to find the watermark—inaddition, the encoding method can be enhanced

It is desirable to be able to specify limitations on the application ofsuch random or pseudo-random keys in encoding a watermark to minimizeartifacts in the content signal while maximizing encoding level. Thispreserves the quality of the content, while maximizing the security ofthe watermark. Security is maximized because erasing a watermark withouta key results in the greatest amount of perceptible artifacts in thedigital content. It is also desirable to separate the functionality ofthe decoder side of the process to provide fuller recognition andsubstantiation of the protection of goods that are essentially digitizedbits, while ensuring the security of the encoder and the encodedcontent. It is also desirable that the separate decoder be incorporatedinto an agent, virus, search engine, or other autonomously operating orsearch function software. This would make it possible for partiespossessing a decoder to verify the presence of valid watermarks in adata stream, without accessing the contents of the watermark. It wouldalso be possible to scan or search archives for files containingwatermarked content, and to verify the validity of the presence of suchfiles in an archive, by means of the information contained in thewatermarks. This scenario has particular application in screening largearchives of files kept by on-line services and internet archives. It isfurther a goal of such processes to bring as much control of copyrightsand content, including its pricing, billing, and distribution, to theparties that are responsible for creating and administering thatcontent. It is another goal of the invention to provide a method forencoding multiple watermarks into a digital work, where each watermarkcan be accessed by use of a separate key. This ability can be used toprovide access to watermark information to various parties withdifferent levels of access. It is another goal of the invention toprovide a mechanism which allows for accommodation of alternativemethods encoding and decoding watermarks from within the same softwareor hardware infrastructure. This ability can be used to provide upgradesto the watermark system, without breaking support for decodingwatermarks created by previous versions of the system. It is anothergoal of the invention to provide a mechanism for the certification andauthentication, via a trusted third party, and public forums, of theinformation placed in a digital watermark. This provides additionalcorroboration of the information contained in a decoded digitalwatermark for the purpose of its use in prosecution of copyrightinfringement cases. It also has use in any situation in which trustedthird party verification is useful. It is another goal of this inventionto provide an additional method for the synchronization of watermarkdecoding software to an embedded watermark signal that is more robustthan previously disclosed methods.

SUMMARY OF THE INVENTION

The invention described herein is a human-assisted random key generationand application system for use in a digital watermark system. Theinvention allows an engineer or other individual, with specializedknowledge regarding processing and perception of a particular contenttype, such as digital audio or video, to observe a graphicalrepresentation of a subject digital recording or data stream, inconjunction with its presentation (listening or viewing) and to provideinput to the key generation system that establishes a key generation“envelope”, which determines how the key is used to apply a digitalwatermark to the digital data stream. The envelope limits the parametersof either or both the key generation system and the watermarkapplication system, providing a rough guide within which a random orpseudo-random key may be automatically generated and applied. This canprovide a good fit to the content, such that the key may be used toencode a digital watermark into the content in such a manner as tominimize or limit the perceptible artifacts produced in the watermarkedcopy, while maximizing the signal encoding level. The invention furtherprovides for variations in creating, retrieving, monitoring andmanipulating watermarks to create better and more flexible approaches toworking with copyrights in the digital domain.

Such a system is described herein and provides the user with a graphicalrepresentation of the content signal over time. In addition, it providesa way for the user to input constraints on the application of thedigital watermark key, and provides a way to store this information witha random or pseudo-random key sequence which is also generated to applyto a content signal. Such a system would also be more readily adaptableby current techniques to master content with personal computers andauthoring/editing software. It would also enable individuals to monitortheir copyrights with decoders to authenticate individual purchases,filter possible problematic and unpaid copyrightable materials inarchives, and provide for a more generally distributed approach to themonitoring and protection of copyrights in the digital domain.

The present invention allows the establishing of responsibility ofspecific copies or instances of copies using digital watermarks.

The present inventions relates to methods for the management anddistribution of digital watermark keys (e.g., private, semiprivate andpublic) and the extension of information associated with such keys inorder to create a mechanism for the securitization of multimedia titlesto which the keys apply.

The present invention additionally relates to “distributed” keys tobetter define rights that are traded between transacting parties inexchanging information or content.

The present invention additionally provides improvements in usingdigital watermark information. For example, the speed of performing akey search for watermarks within content is increased. Additionally,more than one party can cooperate in adding distinguished watermarks atvarious stages of distribution without destroying watermarks previouslyplaced in the content.

Digital watermarks make possible more objective commercial exchanges ofcontent. Trusted systems are more costly but achieve the same goal byestablishing the identity of all electronic exchange participants.Digital watermark per copy systems, however, are not on a simple levelof establishing responsibility of a master work and its derivative copyonly. Multichannel watermarks with private, semiprivate and public keysused as different levels of neighboring rights assist in the creation ofa self-contained model for the exchange of copyrighted works. Privatekey watermarks can be inserted into content to establish ownershiprights (copyright, master right, etc.) with the content creator or anagent of the content creator maintaining control over the key.Semiprivate watermark keys can exist in a separate channel of theinformation signals that make up the work to be exchanged forsubsequently delegating responsibility to distributors or sales entitiesto restrict resale rights in the same manner that physical goods have anexchange of title corresponding to their sale. And finally, publicwatermark keys exist as an independent component of the identification,authentication or advertising of a given work to be widely distributedover networks for initiating the purchase of a sought-after work. Themarket will still rely upon trusted parties who report any distributionor exchange of derivative watermarked copies of these “protected” works.Recognition of copyrights as well as the desire to prevent piracy is afundamental motive of enforcement which uses the mechanism of digitalwatermarks to alleviate fears of copyright holders and transactingparties that responsibility and payment for copyrights cannot beaccomplished.

A necessity has arisen for a system that better defines methods forrecognizing these rights and, with the further creation of bandwidthrights, as in the present invention, makes possible a distributed modelfor digital distribution of content which combines the security of adigital watermark system with efficient barter mechanisms for handlingthe actual delivery of digital goods.

The present invention relates to methods for the management anddistribution of digital watermark keys (e.g., private, semiprivate andpublic) and the extension of information associated with such keys inorder to create a mechanism for the securitization of multimedia titlesto which the keys apply. To differentiate the present invention from theart of public key cryptography, use of “private,” “semiprivate,” and“public” keys refers only to the use of such “information” with thestated purpose of distributing goods and watermarking content, notencryption or cryptography in the general sense.

The present invention additionally relates to “distributed” keys tobetter define rights that are traded between transacting parties inexchanging information or content. Such keys can carry additionalpricing and timing information, and represent coupons, warrants orsimilar financial instruments for purchase of copies of thecorresponding title at particular prices within a specified period oftime. These instruments, as extended keys, could be collected onservers, distributed to individuals and redeemed as part of atransaction to purchase the content. The basis for this type of contenttrading system is described in U.S. Pat. No. 5,428,606 entitled “DigitalInformation Commodities Exchange” (hereinafter, also referred to as “theDICE patent”). The present invention improves on the invention describedin the DICE patent by integrating into the DICE exchange (i.e., TheDigital Information Commodities Exchange) the copyright protectionmechanisms of digital watermarks. Digital watermarks are described inthe following patent applications assigned to The DICE Company:“Steganographic Method and Device”, Ser. No. 08/489,172 (issued as U.S.Pat. No. 5,613,004 on Mar. 18, 1997); “Method for Stega-CipherProtection of Computer Code”, Ser. No. 08/587,943 (issued as U.S. Pat.No. 5,745,569 on Apr. 28, 1998); “Method for Human Assisted Random KeyGeneration and Application for Digital Watermark System”, Ser. No.08/587,944 (issued as U.S. Pat. No. 5,822,432 on Oct. 13, 1998); and“Optimization Methods For The Insertion, Protection, and Detection ofDigital Watermarks in Digitized Data”, Ser. No. 08/677,435 filed on Jul.2, 1996 (issued as U.S. Pat. No. 5,889,868 on Mar. 30, 1999).

In addition, the present invention improves upon the techniques ofdigital watermark systems, described in the patent applications listedabove, by adding methods for the use of this information which allow forimprovements in the speed of performing a key search for watermarkswithin content, and by allowing for more than one party to cooperate inadding distinguished watermarks at various stages of distributionwithout destroying watermarks previously placed in the content. At thesame time, these methods minimize the amount of information which anyone party must divulge to another party, and prevent “downstream”parties from compromising or otherwise gaining control of watermarksembedded by “upstream” parties.

Further improvements of the present invention include the incorporationof retail models using well-known commodities exchanges to accomplishmore efficient means of advertising, negotiating, and delivering digitalgoods in an anonymous marketplace as commonly characterized by suchsystems as the INTERNET. Video-on-demand models, quality of servicereservations considered in subscriber models, and related models thathave been referred to as “time shares” for parceling up processing timein a general computing network will also be differentiated.

DETAILED DESCRIPTION

Digital watermarks are created by encoding an information signal into alarger content signal. The information stream is integral with thecontent stream, creating a composite stream. The effectiveness and valueof such watermarks are highest when the informational signal isdifficult to remove, in the absence of the key, without causingperceptible artifacts in the content signal. The watermarked contentsignal itself should contain minimal or no perceptible artifacts of theinformation signal. To make a watermark virtually impossible to findwithout permissive use of the key, it's encoding is dependent upon arandomly generated sequence of binary 1s and 0s, which act as theauthorization key. Whoever possesses this key can access the watermark.In effect, the key is a map describing where in the content signal theinformation signal is hidden. This represents an improvement overexisting efforts to protect copyrightable material throughhardware-based solutions always existing outside the actual content.“Antipiracy” devices are used in present applications like VCRs, cabletelevision boxes, and digital audio tape (DAT) recorders, but are quiteoften disabled by those who have some knowledge of the location of thedevice or choose not to purchase hardware with these “additionalsecurity features.” With digital watermarks, the “protection,” or moreaccurately, the deterrent, is hidden entirely in the signal, rather thana particular chip in the hardware.

Given a completely random key, which is uniformly applied over a contentsignal, resulting artifacts in the watermarked content signal areunpredictable, and depend on the interaction of the key and the contentsignal itself. One way to ensure minimization of artifacts is to use alow information signal level. However, this makes the watermark easierto erase, without causing audible artifacts in the content signal. Thisis a weakness. If the information signal level is boosted, there is therisk of generating audible artifacts.

The nature of the content signal generally varies significantly overtime. During some segments, the signal may lend itself to maskingartifacts that would otherwise be caused by high level encoding. Atother times, any encoding is likely to cause artifacts. In addition, itmight be worthwhile to encode low signal level information in aparticular frequency range which corresponds to important frequencycomponents of the content signal in a given segment of the contentsignal. This would make it difficult to perform bandpass filtering onthe content signal to remove watermarks.

Given the benefits of such modifications to the application of therandom key sequence in encoding a digital watermark, what is needed is asystem which allows human-assisted key generation and application fordigital watermarks. The term “human-assisted key generation” is usedbecause in practice, the information describing how the random orpseudo-random sequence key is to be applied must be stored with the keysequence. It is, in essence, part of the key itself, since the random orpseudo-random sequence alone is not enough to encode, or possibly decodethe watermark.

Encoding of digital watermarks into a content signal can be done in thetime domain, by modifying content samples on a sample by sample basis,or in the frequency domain, by first performing a mathematical transformon a series of content samples in order to convert them into frequencydomain information, subsequently modifying the frequency domaininformation with the watermark, and reverse transforming it back intotime-based samples. The conversion between time and frequency domainscan be accomplished by means of any of a class of mathematicaltransforms, known in general as “Fourier Transforms.” There are variousalgorithmic implementations and optimizations in computer source code toenable computers to perform such transform calculations. The frequencydomain method can be used to perform “spread spectrum” encodingimplementations. Spread spectrum techniques are described in the priorart patents disclosed. Some of the shortcomings evident in thesetechniques relate to the fixed parameters for signal insertion in a subaudible level of the frequency-based domain, e.g., U.S. Pat. No.5,319,735 Preuss et al. A straightforward randomization attack may beengaged to remove the signal by simply over-encoding random informationcontinuously in all sub-bands of the spread spectrum signal band, whichis fixed and well defined. Since the Preuss patent relies on maskingeffects to render the watermark signal, which is encoded at −15 dBrelative to the carrier signal, inaudible, such a randomization attackwill not result in audible artifacts in the carrier signal, ordegradation of the content. More worrisome, the signal is not theoriginal but a composite of an actual frequency in a known domaincombined with another signal to create a “facsimile” or approximation,said to be imperceptible to a human observer, of the original copy. Whatresults is the forced maintenance of one original to compare againstsubsequent “suspect” copies for examination. Human-assisted watermarkingwould provide an improvement over the art by providing flexibility as towhere information signals would be inserted into content while givingthe content creator the ability to check all subsequent copies withoutthe requirement of a single original or master copy for comparison. Thusthe present invention provides for a system where all necessaryinformation is contained within the watermark itself.

Among other improvements over the art, generation of keys and encodingwith human assistance would allow for a better match of a giveninformational signal (be it an ISRC code, an audio or voice file, serialnumber, or other “file” format) to the underlying content givendifferences in the make-up of the multitudes of forms of content(classical music, CD-ROM versions of the popular game DOOM, personalHTML Web pages, virtual reality simulations, etc.) and the ultimatewishes of the content creator or his agents. This translates into abetter ability to maximize the watermark signal level, so as to forcemaximal damage to the content signal when there is an attempt to erase awatermark without the key. For instance, an engineer could select onlythe sections of a digital audio recording where there were high levelsof distortion present in the original recording, while omitting thosesections with relatively “pure” components from the watermark process.This then allows the engineer to encode the watermark at a relativelyhigher signal level in the selected sections without causing audibleartifacts in the signal, since the changes to the signal caused by thewatermark encoding will be masked by the distortion. A party wanting toerase the watermark has no idea, however, where or at what level awatermark is encoded, and so must choose to “erase” at the maximum levelacross the entire data stream, to be sure they have obliterated everyinstance of a watermark.

In the present invention, the input provided by the engineer is directlyand immediately reflected in a graphical representation of content ofthat input, in a manner such that it is overlaid on a representation ofthe recorded signal. The key generation “envelope” described by theengineer can be dictated to vary dynamically over time, as the engineerchooses. The graphical representation of the content is typicallyrendered on a two dimensional computer screen, with a segment of thesignal over time proceeding horizontally across the screen. The verticalaxis is used to distinguish various frequency bands in the signal, whilethe cells described by the intersection of vertical and horizontal unitlines can signify relative amplitude values by either a brightness or acolor value on the display.

Another possible configuration and operation of the system would use adisplay mapping time on the horizontal axis versus signal amplitude onthe vertical axis. This is particularly useful for digital audiosignals. In this case, an engineer could indicate certain time segments,perhaps those containing a highly distorted signal, to be used forwatermark encoding, while other segments, which contain relatively puresignals, concentrated in a few bandwidths, may be exempt fromwatermarking. The engineer using a time vs. amplitude assisted keygeneration configuration would generally not input frequency limitinginformation.

In practice, the system might be used by an engineer or other user asfollows:

The engineer loads a file containing the digitized content stream to bewatermarked onto a computer. The engineer runs the key generationapplication and opens the file to be watermarked. The application opensa window which contains a graphical representation of the digitizedsamples. Typically, for digital audio, the engineer would see arectangular area with time on the horizontal axis, frequency bands onthe vertical axis, and varying color or brightness signifying signalpower at a particular time and frequency band. Each vertical slice ofthe rectangle represents the frequency components, and their respectiveamplitude, at a particular instant (“small increment”) of time.Typically, the display also provides means for scrolling from one end ofthe stream to the other if it is too long to fit on the screen, and forzooming in or out magnification in time or frequency. For the engineer,this rectangular area acts as a canvas. Using a mouse and/or keyboard,the engineer can scroll through the signal slowly marking out timesegments or frequency band minima and maxima which dictate where, atwhat frequencies, and at what encoding signal level a watermark signalis to be encoded into the content, given a random or pseudo-random keysequence. The engineer may limit these marks to all, none or any of thetypes of information discussed above. When the engineer is finishedannotating the content signal, he or she selects a key generationfunction. At this point, all the annotated information is saved in arecord and a random or pseudo-random key sequence is generatedassociated with other information. At some later point, this combinedkey record can be used to encode and/or decode a watermark into thissignal, or additional instances of it.

A suitable pseudo-random binary sequence for use as a key may begenerated by: collecting some random timing information based on userkeystrokes input to a keyboard device attached to the computer,performing a secure one way hash operation on this random timing data,using the results of the hash to seed a block cipher algorithm loop, andthen cycling the block cipher and collecting a sequence of 1s and 0sfrom the cipher's output, until a pseudo-random sequence of 1s and 0s ofdesired length is obtained.

The key and its application information can then be saved together in asingle database record within a database established for the purpose ofarchiving such information, and sorting and accessing it by particularcriteria. This database should be encrypted with a passphrase to preventthe theft of its contents from the storage medium.

Another improvement in the invention is support for alternate encodingalgorithm support. This can be accomplished for any function whichrelates to the encoding of the digital watermark by associating with thepseudo-random string of 1s and 0s comprising the pseudo-random key, alist of references to the appropriate functions for accomplishing theencoding. For a given function, these references can indicate aparticular version of the function to use, or an entirely new one. Thereferences can take the form of integer indexes which reference chunksof computer code, of alphanumeric strings which name such “coderesources,” or the memory address of the entry point of a piece of codealready resident in computer memory. Such references are not, however,limited to the above examples. In the implementation of software, basedon this and previous filings, each key contains associated references tofunctions identified as CODEC—basic encode/decode algorithm whichencodes and decodes bits of information directly to and from the contentsignal, MAP—a function which relates the bits of the key to the contentstream, FILTER—a function which describes how to pre-filter the contentsignal, prior to encoding or decoding, CIPHER—a function which providesencryption and decryption services for information contained in thewatermark, and ERRCODE—a function which further encodes/decodeswatermark information so that errors introduced into a watermark may becorrected after extraction from the content signal.

Additionally, a new method of synchronizing decoder software to anembedded watermark is described. In a previous disclosure, a methodwhereby a marker sequence of N random bits was generated, and used tosignal the start of an encoded watermark was described. When the decoderrecognizes the N bit sequence, it knows it is synchronized. In thatsystem the chance of a false positive synchronization was estimated at1/(N̂2) (“one over (N to the power of 2)”). While that method is fairlyreliable, it depends on the marker being encoded as part of thesteganographic process, into the content stream. While errors in theencoded bits may be partially offset by error coding techniques, errorcoding the marker will require more computation and complexity in thesystem. It also does not completely eliminate the possibility that arandomization attack can succeed in destroying the marker. A new methodis implemented in which the encoder pre-processes the digital samplestream, calculating where watermark information will be encoded. As itis doing this, it notes the starting position of each completewatermark, and records to a file, a sequence of N-bits representingsample information corresponding to the start of the watermark, forinstance, the 3rd most significant bit of the 256 samples immediatelypreceding the start of a watermark. This would be a 256 bit marker. Theorder in which these markers are encountered is preserved, as it isimportant. The decoder then searches for matches to these markers. Itprocesses the markers from first to last, discarding each as it isfound, or possibly not found within a certain scanning distance, andproceeding with the remaining markers. This method does not modify theoriginal signal with marker information and has the added benefit thathigh-significance sequences can be used, requiring that an attack basedon randomizing markers do very obvious damage to the content stream.

With multichannel encoding, both private and public keys, similar in useto those from public-key cryptosystems, could be provided forauthentication by concerned third party vendors and consumers, as wellas contribute to better management and protection of copyrights for thedigital world that already exist in the physical world. For moreinformation on public-key cryptosystems see U.S. Pat. Nos. 4,200,770Diffie-Hellman, 4,218,582 Hellman, 4,405,829 RSA, 4,424,414 HellmanPohlig. In addition, any number of key “designations” between “public”and “private” could be established, to provide various access privilegesto different groups. Multi-channel watermarks are affected by encodingseparate watermark certificates with separate keys by eitherinterleaving windows in the time domain or by using separate frequencybands in the frequency domain. For instance, 3 separate watermarks couldbe encoded by using every third sample window processed to encode acorresponding certificate. Alternatively, complete watermarks could beinterleaved. Similarly, the frequency range of an audio recording mightbe partitioned into 3 sub-ranges for such a purpose. Use ofmulti-channel watermarks would allow groups with varying accessprivileges to access watermark information in a given content signal.The methods of multichannel encoding would further provide for moreholographic and inexpensive maintenance of copyrights by parties thathave differing levels of access priority as decided by the ultimateowner or publisher of the underlying content. Some watermarks could evenplay significant roles in adhering to given filtering (for example,content that is not intended for all observers), distribution, and evenpricing schemes for given pieces of content. Further, on-the-flywatermarking could enhance identification of pieces of content that aretraded between a number of parties or in a number of levels ofdistribution. Previously discussed patents by Preuss et al. andGreenberg and other similar systems lack this feature.

Further improvements over the prior art include the general capacity androbustness of the given piece of information that can be inserted intomedia content with digital watermarks, described in SteganographicMethod and Device and further modified here, versus “spreadspectrum-only” methods. First, the spread spectrum technique describedin U.S. Pat. No. 5,319,735 Preuss et al. is limited to an encoding rateof 4.3 8-bit symbols per second within a digital audio signal. This isbecause of the nature of reliability requirements for spread spectrumsystems. The methods described in this invention and those of theprevious application, “Steganographic Method and Device,” do notparticularly adhere to the use of such spread spectrum techniques, thusremoving such limitation. In the steganographic derived implementationthe inventors have developed based on these filings, watermarks ofapproximately 1,000 bytes (or 1000.times.8 bits) were encoded at a rateof more than 2 complete watermarks per second into the carrier signal.The carrier signal was a two channel (stereo) 16-bit, 44.1 Khzrecording. The cited encoding rate is per channel. This has beensuccessfully tested in a number of audio signals. While this capacity islikely to decrease by 50% or more as a result of future improvements tothe security of the system, it should still far exceed the 4.3 symbolsper second envisioned by Preuss et al. Second, the ability exists torecover the watermarked information with a sample of the overall pieceof digitized content (that is, for instance, being able to recover awatermark from just 10 seconds of a 3 minute song, depending on therobustness or size of the data in a given watermark) instead of a fulloriginal. Third, the encoding process described in Steganographic Methodand Device and further modified in this invention explicitly seeks toencode the information signal in such a way with the underlying contentsignal as to make destruction of the watermark cause destruction of theunderlying signal. The prior art describes methods that confuse theoutright destruction of the underlying content with “the level ofdifficulty” of removing or altering information signals that may destroyunderlying content. This invention anticipates efforts that can beundertaken with software, such as Digidesign's Sound Designer II orPassport Design's Alchemy, which gives audio engineers (similarauthoring software for video also exists, for instance, that sold byAvid Technology, and others as well as the large library of pictureauthoring tools) very precise control of digital signals, “embedded” orotherwise, that can be purely manipulated in the frequency domain. Suchsoftware provides for bandpass filtering and noise elimination optionsthat may be directed at specific ranges of the frequency domain, a ripemethod for attack in order to hamper recovery of watermark informationencoded in specific frequency ranges.

Separating the decoder from the encoder can limit the ability to reversethe encoding process while providing a reliable method for third partiesto be able to make attempts to screen their archives for watermarkedcontent without being able to tamper with all of the actual watermarks.This can be further facilitated by placing separate signals in thecontent using the encoder, which signal the presence of a validwatermark, e.g. by providing a “public key accessible” watermark channelwhich contains information comprised of a digitally signed digitalnotary registration of the watermark in the private channel, along witha checksum verifying the content stream. The checksum reflects theunique nature of the actual samples which contain the watermark inquestion, and therefore would provide a means to detect an attempt tograft a watermark lifted from one recording and placed into anotherrecording in an attempt to deceive decoding software of the nature ofthe recording in question. During encoding, the encoder can leave roomwithin the watermark for the checksum, and analyze the portion of thecontent stream which will contain the watermark in order to generate thechecksum before the watermark is encoded. Once the checksum is computed,the complete watermark certificate, which now contains the checksum, issigned and/or encrypted, which prevents modification of any portion ofthe certificate, including the checksum, and finally encoded into thestream. Thus, if it is somehow moved at a later time, that fact can bedetected by decoders. Once the decoder functions are separate from theencoder, watermark decoding functionality could be embedded in severaltypes of software including search agents, viruses, and automatedarchive scanners. Such software could then be used to screen files orsearch out files from archive which contain specific watermarkinformation, types of watermarks, or lack watermarks. For instance, anonline service could, as policy, refuse to archive any digital audiofile which does not contain a valid watermark notarized by a trusteddigital notary. It could then run automated software to continuouslyscan its archive for digital audio files which lack such watermarks, anderase them.

Watermarks can be generated to contain information to be used ineffecting software or content metering services. In order to accomplishthis, the watermark would include various fields selected from thefollowing information:

title identification;unit measure;unit price;percentage transfer threshold at which liability is incurred topurchaser;percent of content transferred;authorized purchaser identification;seller account identification;payment means identification;digitally signed information from sender indicating percent of contenttransferred; anddigitally signed information from receiver indicating percent of contentreceived.

These “metering” watermarks could be dependent on a near continuousexchange of information between the transmitter and receiver of themetered information in question. The idea is that both sides must agreeto what the watermark says, by digitally signing it. The sender agreesthey have sent a certain amount of a certain title, for instance, andthe receiver agrees they have received it, possibly incurring aliability to pay for the information once a certain threshold is passed.If the parties disagree, the transaction can be discontinued before suchtime. In addition, metering watermarks could contain account informationor other payment information which would facilitate the transaction.

Watermarks can also be made to contain information pertaining togeographical or electronic distribution restrictions, or which containinformation on where to locate other copies of this content, or similarcontent. For instance, a watermark might stipulate that a recording isfor sale only in the United States, or that it is to be sold only topersons connecting to an online distribution site from a certain set ofinterne domain names, like “.us” for United States, or “.ny” for NewYork. Further a watermark might contain one or more URLs describingonline sites where similar content that the buyer of a piece of contentmight be interested in can be found.

A digital notary could also be used in a more general way to register,time stamp and authenticate the information inside a watermark, which isreferred to as the certificate. A digital notary processes a documentwhich contains information and assigns to it a unique identificationnumber which is a mathematical function of the contents of the document.The notary also generally includes a time stamp in the document alongwith the notary's own digital signature to verify the date and time itreceived and “notarized” the document. After being so notarized, thedocument cannot be altered in any way without voiding its mathematicallycomputed signature. To further enhance trust in such a system, thenotary may publish in a public forum, such as a newspaper, which bears averifiable date, the notarization signatures of all documents notarizedon a given date. This process would significantly enhance the trustplaced in a digital watermark extracted for the purpose of use insettling legal disputes over copyright ownership and infringement.

Other “spread spectrum” techniques described in the art have predefinedtime stamps to serve the purpose of verifying the actual time aparticular piece of content is being played by a broadcaster, e.g., U.S.Pat. No. 5,379,345 Greenberg, not the insertion and control of acopyright or similar information (such as distribution path, billing,metering) by the owner or publisher of the content. The Greenberg patentfocuses almost exclusively on concerns of broadcasters, not contentcreators who deal with digitized media content when distributing theircopyrightable materials to unknown parties. The methods described arespecific to spread spectrum insertion of signals as “segment timingmarks” to make comparisons against a specific master of the underlyingbroadcast material—again with the intention of specifying if thebroadcast was made according to agreed terms with the advertisers. Noprovisions are made for stamping given audio signals or other digitalsignals with “purchaser” or publisher information to stamp theindividual piece of content in a manner similar to the sales of physicalmedia products (CDs, CD-ROMs, etc.) or other products in general (pizzadelivery, direct mail purchases, etc.). In other words, “intervaldefining signals,” as described in the Greenberg patent, are importantfor verification of broadcasts of a time-based commodity like time anddate-specific, reserved broadcast time, but have little use forindividuals trying to specify distribution paths, pricing, or protectcopyrights relating to given content which may be used repeatedly byconsumers for many years. It would also lack any provisions for the“serialization” and identification of individual copies of media contentas it can be distributed or exchanged on the Internet or in otheron-line systems (via telephones, cables, or any other electronictransmission media). Finally, the Greenberg patent ties itselfspecifically to broadcast infrastructure, with the described encodingoccurring just before transmission of the content signal via analog ordigital broadcast, and decoding occurring upon reception.

There are several issues preventing greater volumes of electronicdistribution of multimedia content. While such distribution is in facttechnically feasible at the present time, attempts atcommercially-viable systems are still plagued by these problems, andrender digital multimedia exchanges unsatisfactory on a scale comparableto mass retailing in consumer goods markets, such as that of digitalaudio recordings on compact discs (CDs). So, while it is possible totransmit a single copy of a digital recording, as 16-bit 44.1 kHz stereo(CD-quality), to an individual from an archive, making such copiesavailable to a large number of paying consumers on demand is still notyet being implemented. The problems fall into severalclasses—distribution bandwidth, copyright protection, technologicalcomplexities, and “efficient shopping.”

In a similar vein to distribution of physical goods in the real world,bandwidth and developments that in effect increase bandwidth arecreating profound new business models in how content creators andpublishers can distribute their works. From the simplest compressionschemes, to actual use of “wired” technology including ISDN, cablemodems, ATM, and fiber optic lines, the trend is to greater amounts ofbandwidth available to on-line users. It is a conundrum of the digitalage that the object of bandwidth use will most likely require downloadsof copyrighted works, or transaction-based models, to justify suchincreases in bandwidth availability. The actual works sought exist as apredefined set of protocols or standards that, when adhered to byhardware or software, can be played back flawlessly many times over.Such works include 74 minute CDs and 300 MB CD-ROMs, among the manyphysical transport media that now exist. However, the actual digitalsignals that make up the audio or video clip are not dependent on newplayback standards or PC playback software. Simply put, “clips” do notneed additional steps to be played back. The signals that a CD carriesare not dependent on the CD for its commercial value and could just aseasily be carried on a DAT, Minidisc, DVD or any other physical mediumthat can carry audio signals (for example) in a format of 44.1 kHz and16 bits (“CD quality”). The most apparent drawback is that CDs are notrecordable mediums, like cassettes or the above mentioned mediums, sothat they are not as economical when coupled with prevalent recordingdevices such as DAT recorders, PC hard drives, DVD recorders, etc., orwhen coupled with the advent of electronic lines or “pipes” to the home.

Compression can be both lossless and lossy and has an effect on how agiven piece of content can be commercially-valued in the marketplace.Physical goods pricing can be thought of similarly with cassette tapesand CDs which trade at divergent values because of audio quality anddegradation, or lack thereof, of such quality over time. Althoughmanufacturing costs of CDs are lower than cassettes, CDs are actuallymore expensive than cassettes in the marketplace. Presumably a premiumis placed on the quality of the stored content, music or otherwise, andthe durability of the medium itself, which can be played without loss ofquality far more times than any analog tape. However, the CD is astorage media that must be manufactured, put into inventory, sent bycarrier to physical locations, etc., and has an inherent tendency tostandardization (the CD is actually a specification determined bymanufacturers of both the hardware and software).

Hard costs for marketing and promotion may be better spent across alarger geographical segment, easily accomplished by such electronicnetworks as the INTERNET but harder to assess in terms of actual sales.Determining market reception is also difficult when buyers arerelatively unknown and not available for localized comment or analysisin typical, physical retail store sites (such as Tower Records, SamGoody's, Blockbuster, etc.).

What equalizes physical mediums such as DAT, CD and DVD, are the linesrunning between geographic locations, including POTs (i.e., Plain OldTelephone), cable, fiber optic, electric power lines and wireless accesspoints including radio, satellite, cellular phones, and the like. Thedigitization of these access points and the networks that make thempossible ultimately dictate what devices will be appropriate toconsumers of the present day and the future. That is, matters of costand even reputation will increasingly dictate the economics of thedistribution of digital content, much the way much the way matters ofcosts and reputation dictate sales in other consumer goods markets. Nolonger will it necessarily be important to manufacture X number ofcopies of a given work for distribution at N number of sites to capturethe optimal market of consumers. The present invention is predicated onnot only the existence of a plurality of access points, as discussed inthe DICE patent (U.S. Pat. No. 5,428,606), but also on a domain wheredigital content can pass freely between networks much as the INTERNETworks with a common protocol (TCP/IP) to facilitate the exchange of datafiles. However, the ability and desire to orient delivery of digitizedcontent around the specs that describe the content, rather thanprotocols necessary to redefine the content for exchange over a specificprotocol (such as TCP/IP), can better define more convenient delivery ofthe content between publishers and subscribers given the heterogeneousnature of transmission media (POTs, cable, etc.), the unchangingbehavior of “consumer electronically-described” media content(FM-quality, CD-quality, etc.), and the varying configurations of pipesutilized by both publishers and subscribers more concerned with thedistribution and exchange of digital goods, not configurations of theimmediate input and output devices that are linked by a multitude ofelectronic exchanges (cable, POTs, wireless, electric power, etc.).Indeed, shifting only the recordable media cost to consumers that, forthe most part, already own one or more such devices and may haveexposure to a number of broadcast and advertising media (INTERNET,on-line services, radio, cable, print, etc.) may afford both buyers andsellers the cheapest means of profitably exchanging digital goods.

At present, over 15% of the U.S. population has more than one phoneline, 60 million households have cable television, and 15 millionconsumers are on-line subscribers. ISDN is also experiencing growingdemand in the US to give consumers higher bandwidth in the interim.Projected increases of bandwidth portend future supply and demand oflarger data files of copyrighted passive works (e.g., music, pictures,video, etc.) and interactive works (e.g., games, software, etc.),putting pressure on the need for increases of bandwidth. Never beforehas increased available bandwidth suffered from a lack of demand byusers. In other words, new bandwidth seems to create its own demand.Much of the presumption in increased investments in creating thebandwidth has been to enable the transfer of audio, video, andmultimedia files that typically occupy more than 5 MB of space per file.The misanalyzed aspect of these investment plans is a method foraddressing digital piracy of copyrighted works and efficient,market-based allocation of the subsequent bandwidth by users. Thepresent invention better defines maximized operations dependent more onthe specs that describe playback of content than redefining additionalprotocols which add additional and unnecessary levels to the playback ofthe content. With such advances, exchanging media content canpotentially be made as easy as exchanging physical content.

The present invention additionally reduces costs in the distributionprocess, provides the monitoring of, and thus ability to protect,copyrights within the media, and allows the implementation of betterpayment systems suited to the distribution of digital goods. What isclear is that bandwidth may never be unlimited, but with considerationmade to real world economics, efficient and realistic methods forconsidering “fill rate” (the actual titles “delivered” to a purchaserversus the titles “ordered”), speed (actual time it takes for a consumerto receive desired content), and cost (expense given trade-offs ofimmediate availability at a given price point to the consumer, e.g.immediate fulfillment equates to higher pricing, versus delayed deliveryof the same content at a lower price) all represent input variables in areal world “retail experience” that may be replicated in the digitaldomain. The present invention takes into consideration the behavior ofparties engaged in selling content that may not be initially valued atthe same price by all market participants and is subject to the samepromotion hype as goods in the real world. In the digital domain,sampling, trailers, and pre-release hype can be replicated to fosterdemand for a given title of a digital good with many of the same resultsthat are experienced in the real world.

Evidence of supposedly more efficient schemes for retail include U.S.Pat. No. 4,528,643 to Freeny, which shifts too much of the manufacturingcosts to physical retail sites, thus increasing the cost of doingbusiness on the retail side with possible increases of convenience tothe consumer. In the Freeny patent, retailers are envisioned to havelocalized reproduction of given digitized products (music, video, etc.)and a means to use “owner authorization codes” to verify the electronictransmission of a given work from some “master file unit” to recordablemedia (VCR, recordable CD, etc.). Freeny refers to mail order clubs andother direct marketing efforts as being inefficient versus the localizedmanufacturing structure. These predictions have since been proven false.It is because of the nebulous concept of intellectual property coupledwith the extreme expense on retailers for the in-store manufacturingunits that makes clear the benefit of leveraging available bandwidth tocontent creators, publishers, consumers and “pipe owners.” Theefficiency of such operations as Federal Express in delivering evensmall packages in under 24 hours and the ability of “fulfillment houses”to effectively carry all but the most obscure titles (music, books,videos, etc.) has made actual “manufacturing” of a given physical mediaobject (CD, VHS tape, etc.) or what Freeny describes as a “materialobject” simply uneconomical and increasingly irrelevant in an age whenbandwidth and digital recording devices such as PCs, Minidiscs, digitalvideo disks (DVD), etc. make physical retail-based, or in-store, copyingmore of an inconvenience.

The paradox of digital copies is the ease and relatively inexpensiveoperation of making perfect copies from a single instance of a work,thus providing the potential of unauthorized copies or piracy. Thebinary data that comprises a digitized work is an approximation of ananalog signal. As is well known binary ones and zeros can be manipulatedto form words, audio, pictures, video, etc. Manners in which individualcopies can be marked so that responsibility can be assigned toindividual copies that are derivatives of the master copy is documentedin the patent applications by The DICE Company referenced above (i.e.,U.S. Pat. No. 5,428,606, and the “Steganograhic Method and Device”,“Method for Human-Assisted Random Key Generation and Application forDigital Watermark System”, “Method for Stega-Cipher Protection ofComputer Code”, “Digital Information Commodities Exchange” and“Optimization Methods for the Insertion, Protection, and Detection ofDigital Watermarks In Digital Data” applications), and in alternativeproposals by Digimarc Corporation (a form of pseudo-randomly encodingdigital signatures into images), Bolt Beranek & Newman (embeddedsignaling) and others. Additional proposals for cryptolopes andcryptographic containers by IBM and Electronic Publishing Resources(EPR) place control of copyrights and other “rights” in the control ofIBM and EPR, not the individual content creator or publisher. What isclear is that trusted systems, where all parties are known in some wayto establish responsibility for instances of copied files, are notrealistically possible with the number and ease of manufacture ofdigitization systems such as general purpose computing devices. Atpresent, over 100 million such devices are in existence, and it is notpossible to guarantee that all of these systems will be made to adhereto the defined parameters of a trusted machine for verification and theestablishment of responsibility for individual copies made of digitalworks. Profit motives continue to exist for individuals to make perfectcopies and distribute these copies without paying the partiesresponsible for creating and distributing the content. Moreover, beyondconsiderations of digital exchanges that do establish responsibility forthe goods being sought, the digital bits that comprise thecommercially-valuable works suffer both from lack of use by partiesseeking more secured means of distributing and marking content, andlegal tanglings by parties that own the copyrights and seek any entitydeemed to copy works illicitly for settlement of disputes. That is, withthe great number of untrusted systems in existence, many copyrightholders have resorted to legal challenges of on-line services andindividuals found to be in possession of unauthorized copies ofcopyrighted works. The resultant digital marketplace tends to favorlarger companies who can afford to seek legal settlements withoutdelivering any substantial benefit over smaller companies that for manyreasons would otherwise favor digital distribution of content tominimize overall costs. The remedy for such problems is addressed in thepreviously U.S. patent and patent applications by The DICE Company andother parties mentioned above (e.g., NEC, Digimarc, EPR, IBM, etc.).

The present invention, relates to methods for parceling rights tobenefit buyers and sellers of digital works in ways that even theplaying field of the marketplace given the resource of electronicmarketplaces that can work with such networks as the INTERNET. Too oftenphysical world solutions are offered where digital domain considerationsare completely ignored.

Another issue relating to the present invention involves haphazardgrafting of physical world pricing and automated payment systems ontodigital systems. Issues of inventory, physical movement, and manufactureof goods are completely muted in digital exchanges, but replaced bybandwidth utilization and efficiency, one-to-one connections, andone-to-many connections, i.e., seeking and reaching customers in ananonymous marketplace. It is these issues that will better determine theprice of a given digital good. Timing of the good (that is, live versusbroadcast rerelease of the same digital good) and the necessity offilters or brokers which guide individuals to acceptable goods arevariables that will play roles in determining the ultimate efficiency ofexchanging digital goods.

Among some of the proposed systems are a proposal by Wave Systems, whichnecessitates the use of proprietary boxes using encryption to tie theuser's “exchange device” to some party that can determine the validityof the box, a trusted system. Unfortunately, adoption of such a solutionwould necessitate the purchase of separate boxes for separate vendors ofparticular works or the routing of all digital goods through aproprietary system that then resembles closed cable, video-on-demand,and private networks. Similar approaches are used by merchants usingcredit card processors and the use of credit card authorization devicesand paying incremental costs for the use and security delivered by thecredit card processor. Further systems include log-in procedures tovalidate the accessing party's identification. The premium paid for suchsystems is arguably excessive when compared to contentcreator-controlled implementation of digital watermarks and an exchangeby which all distribution parties are engaged in the marketplace to payfor bandwidth rights to market-test given digital goods. The onlyalternative available to smaller content creators and artists is to sellcontent at no charge, thus jeopardizing potential future returns, orpurchasing outright the hardware to plug-in to existing networks, anexcessive cost if such “bandwidth” could be more fairly priced in aneed-based system such as that discussed in this disclosure.

As an improvement to the system discussed in U.S. Pat. No. 5,428,606,the present invention ties so-called “header” files into the actualcontent. U.S. Pat. No. 5,428,606 addresses the separation of contentfrom its references (“header”) to facilitate more efficient access andexchange of digital content. The “headers” described in this patentmight be construed in the real world as options or futures, and isdiscussed below. The present invention concerns itself with creating amethod for introducing a layer of price and distribution determinationgiven the necessity of payment in delivering digital content betweenpoints in the digital domain which may not suffer from any physicallimitations but are limited by bandwidth considerations.

Some attempts at the exchange of content are being tried with existingnetworks such as the INTERNET. The complexities extant are apparent inthe requirements of the operating protocols and the dependence of TCP/IPfor orienting content and subsequently playing it back through “players”that are TCP/IP compliant, if the INTERNET is solely considered. Moreissues regarding the INTERNET are further discussed below.

Conceptually, “agents” partially meet some of the expectations of acontent-based system, except agents are also dependent on participationby sites willing to allow for pure price comparisons and later reportingto the purchasing party. At present, many sites lock out such agents asthey seek to profit by value-added services which are not considered byan agent when “shopping prices.” Video-on-demand systems also propose amore closed system that is reliant on a proprietary network to deliver avideo (or audio for that matter) to a consumer with the least amount oftime delay while satisfying the demands for the video by many otherconsumers seeking the same video at the same time. The differencebetween such a system and that disclosed in the present invention isthat such video on demand networks propose “subscriber” models where allconsumers are deemed to have the same right to a given, demanded, pieceof content at any time. That is, all participants are “subscribers” whoprepay a fee structure that cannot necessarily be justified givenbandwidth and processing limitations for delivering digital goods “ondemand.” In such a system, infrastructure cost can run as high as 5,000dollars per subscriber, as with Time Warner's system in Orlando, Fla.

In the present invention, time is not an absolute standard to measuresatisfaction. In the same manner that retail stores cannot always have agiven audio or video work “on demand,” other factors may play into thecompetitiveness of that entity to contribute to the satisfaction of agiven consumer. These issues include a depth (number of copies orcopyrights of a given title) or breadth (number) of titles offered, avariety of delivery mediums to satisfy customers with varying accessinfrastructure (cable, telephone, fiber optic, electric power, etc.),pricing, and, finally, service as it can be applied in an anonymousmarketplace. Services may include the know-how of buyers employed by agiven digital broker in offering samples of new releases or unknownartists, as well as special price offers given the amount and types ofdigital goods being purchased. What is certain is that a “subscriber”model is subject to the same deficiencies of a cable model orproprietary on-line service that may not be able to balance financialconsiderations with the variety and cost of titles sought by individualsat any given time. On the seller side, maximizing profit per titlecannot always be satisfied if distribution control or proprietary rightsare granted to any single entity which, by the present nature of theINTERNET and future interpretations of on-line commerce, cannot beguaranteed. Indeed, the above-mentioned U.S. Pat. No. 5,428,606discusses a situation where all subscribers can be publishers. Forsmaller parties, naturally lacking sufficient resources to initially andadequately market and promote titles, a more open system for negotiatingdistribution rights must be sought by commoditizing the good that mosteffects exchange of their goods in the digital domain (i.e., bandwidth).

Moreover, in an anonymous marketplace, even small aggregators of contentmay be able to adequately promote the digital properties of other smallcontent creators with value-added services. These services, such assamples of content, used to entice buyers, just as trailers createdemand for upcoming movies, could be delivered to a differing type ofsubscriber, much as music aficionados subscribe to College Music Journal(CMJ) and other resources to sample new, relatively uncommercial music.Samples of 10-30 seconds could be sent directly to consumer e-mailaddresses replicating the prevalent listening bars set up by physicalmusic retailers seeking to introduce new titles to eager listeners.Other services might be more representative of “music chat rooms” orspecial title web-sites, to more fully entice potential buyers with agreater amount of purchase information. Much of the premise of suchservices and fulfilling demand for content, however, will require a moreefficient means to allocate bandwidth as according to an embodiment ofthe present invention. Without such bandwidth allocation, even smalldigital goods vendors will need to purchase substantial hardware, fromT1 lines to high-powered UNIX machines, meaning high entry or fixedcosts, to effectively market what may only be a single title in a year.

The present invention deals with commoditization of the digitaldistribution of multimedia content. It is important to note that increating such a market, one must consider two commodities. One is thetitle, or data itself, of which there is a theoretical unlimited supplyover time (limited only by how many copies of a given title that can bemade). The second commodity is bandwidth. This is a commodity which mustbe treated more like traditional commodities, since its supply isphysically limited over discrete periods of time. “Fatter” pipes andcompression can only increase upper limits given the observed tendencyfor larger data files to accompany bandwidth increases in the shortterm. In practice, bandwidth limits act as a parameter on the capacityof a distribution channel at any given moment in time, since there is afixed amount of bandwidth. In dealing with commercial markets, where,for example, 80% of the consumers want 20% of the products, (and fordigital marketplaces, generally all at the same instant), some premiumcan be observed as with “first come first serve” principles in physicalsales channels. The difference is that an additional copy of a digitalwork can be made almost instantaneously, although additional bandwidthcannot be replicated. Even in instances with theoretically infinite timeto fill all orders, most buyers will have given up and “left” theexchange after waiting a short period, during which time they get nosatisfaction, measured explicitly by an access or download of aspecifically desired title. On-line services today are typically plaguedby this shortfall, leading most users to complaints of access and speed.Market-based principles could alleviate some of this problem on both thebuyer and seller side if bandwidth was treated as the commodity it is.“Quality of service” proposals partially address this issue, thoughcosts are stacked on the seller side because such systems are almostalways proprietary given the requirement of high infrastructure expensesto enable timely delivery to all subscribers to the “private” network.

The present invention combines “efficient shopping” principles with thecommoditization of bandwidth and titles to create an exchange, underprinciples as described in the DICE patent, where in place of asecurity, one can buy titles where a component of the title price isactually a bandwidth option, or bandwidth right. The purchaser buys aright on the underlying title to take delivery of the title via aparticular transport medium which uses a particular allocation oftransmission bandwidth at a particular time. According to an additionalembodiment of the present invention, distributor or contentaggregator-only purchases of bandwidth are stipulated as options fordigital distribution increase, in terms of available channels (such ascable, satellite, etc.). In this case, the end user never deals with thebandwidth right, although the costs of such rights may by passed on inthe retail price of the title which is purchased and downloaded. Inother words, the distributor must purchase rights in advance to supporta projected volume level of distribution. These pre-purchased rights arethen attached to individual downloads. These instruments can vary inprice, much like stock options, based on time. Only, in this case, it isthe amount of time required to receive the underlying security, whichimplicitly indicates how much bandwidth will be used by the buyer. Thebandwidth actually implies time. The spectrum could range from lowestbandwidth, such as an e-mail delivery by POTs lines, which usesbandwidth when it is otherwise not in use and is at the convenience ofthe seller (sender), and not the buyer (receiver), to highest bandwidththat may be parallel or direct access fiber optic line which may benecessary for users acting as wholesalers between electronically-linkedparties who seek content for negotiated delivery.

U.S. Pat. No. 5,428,606 uses the concept of a “DIP” (“digitalinformation packet”) header to create an advertising, distribution, andpricing device which allows for the dissemination of references to anddescription of particular titles available electronically. The DICECompany's related digital watermark patent and patent applications asdiscussed previously disclose an exchange model fordigitally-watermarked content and digital watermark keys whereby keyswhich allow a party to scan or imprint watermarks are distributed,possibly electronically, at the discretion of the controlling party.Both these methods have in common the fact that they allow for thedistribution of some information related to an underlying work, withoutdistributing the work itself. It is in the interest of simplicity,therefore, to allow for the combination or conjunction of theseinformation items in addition to associating them with a bandwidth rightor option for the downloading of the copyrighted work.

Essentially, some of this negotiation of bandwidth takes place betweenthe “Baby Bells” and AT&T or other long distance providers when settlingrights-of-way between points of a telephone conversation. At present, akey difference is the utility value of a phone call sets the value ofthe “phone time” being sold. Bandwidth rights as envisioned in anembodiment of the present invention price the commodity of bandwidthgiven the luxury item being sought (i.e., data or content). The presentinvention seeks to value the immediacy as well as convenience (of whichprice may play a role) in receiving a given packet of data (mediacontent, software, etc.) from one or many locations where it maybeavailable to other locations. The lines may be heterogeneous betweenpoints, thus offering a more open bidding system between line owners,content creators and publishers, and end users or consumers. At present,no such “negotiation” can be handled by network operators running linesto the same home or office. Indeed, lines are usually charged at a fixedfee, not by what amount they are used. In some cases, lines are billedby a raw measure of the data transferred, but not in relation to theactual value of such data nor with respect to the value of othertransfers which might occur simultaneously via the same line. This sortof billing-by-byte tends to discourage use, but it is a very coarse toolwith which to manage utilization. To fill the middle market for demandof these lines for telecommunications lines in particular, long distancecarriers such as AT&T, MCI and Sprint sell excess capacity to“wholesalers,” while the larger companies generally have priceconstraints.

The potential demand for bandwidth is clearly evident with suchwidespread use of networks, epitomized by the INTERNET. But, aspreviously discussed, smaller, specialist “retailers” and “wholesalers”of services or content that could be marketed over these lines are notefficient. The potential for efficient pricing exists as demonstrated by“call-back” services, which route calls from one location through athird party location, benefiting from that location's line pricing,though the overall market for such services is still only about $300million annually. What restricts more open allocation of bandwidth ispolitical in nature. At the same time, cross subsidization of localphone access from more expensive long distance and international serviceis open for rationalization envisioned by the present invention. Even ifmore network services could offer greater returns for line use, and thusbandwidth use, public telephony accounts for over 85% of the market. Aparticular model being evaluated is called “sender takes all” where theaccess point, or the party that provides access to an end user, wouldtake all the access charges. This is similar to the INTERNET, but isstill stacked against smaller players, of which content providers arethe least favored if they seek “distribution channels” over networksthat still lack proper market incentives for use of bandwidth. Someother models being considered include a single access charge, which isan improvement over current international accounting standards beingnegotiated between countries. Still, this model does not take intoconsideration the available bandwidth controlled bynon-telecommunications parties, such as cable companies, thoughultimately the commodity being brokered is actually common bandwidth.The uneasy balance in negotiating access is being tempered by the steadyincrease by telecommunications companies to upgrade their lines to offercomparable bandwidth access as that presently available through cablecompanies. A final issue for consideration is the mobile market ofcellular phones and other similar technologies though there are far morerestrictions on the amount of available bandwidth for contentdistribution, the move to free up more radio spectrum for digitalsignals may lead to increases as high as a hundredfold in the capacityof the network which would make the electronic delivery of a singleaudio track realistic. Still, the present invention seeks the impositionof market-based pricing of available bandwidth to end users and contentproviders given the absence of any such system currently.

With the recent removal of barriers which previously preventedcompetition between cable companies, telecommunications companies, andregional Bell operating companies (RBOCs) the matter of cost of servicesor content being delivered over common pipes and the concept of a singleentity dominating the “network” will almost surely come to an end asmany companies are strongly positioned in their local markets. Atpresent, “local loop” access to end users still presents formidablebarriers to competition—40-45% of the cost of a long distance call ispaid to the RBOC whose lines run into the home or business making thecall. In total, the cost to a network for local distribution isapproximately 80%. Proposals for separating a network into itsinfrastructure and service components would likely benefit from theinvention being outlined. In such a scenario, the owner of the networkwould offer access to providers on the same terms, while managing theoperation of the infrastructure. Simple models, such as flat rateINTERNET access, are problematic in the overall model for market-basedpricing of bandwidth in that capital costs are completely ignored thoughsuch costs are the parameter by which any business model must be judged.Though the cost of an extra phone call over a given network may benegligible, the cost of pumping large multimedia files, which have fardifferent utility value to users of the network versus a “telephoneconversation,” is relatively high in the aggregate and can be witnessedwith the progressively slow performance of many on-line providers andthe INTERNET. The goal for network providers will be to offervalue-added services to users as well as value-added access to contentthat is controlled by copyright holders seeking maximum distribution(given speed and quality) to content seekers. These parties may onlyneed the network at certain times or for certain releases of content.Meanwhile, periphery services such as music sampling, game testing, betasoftware distribution, will most likely comprise value-added servicesbeyond the present scope of strict telephony. The pressure, generatedfrom capital cost concerns, to provide a system that prices speed andline capacity is aptly answered with the creation of bandwidth rightsand incorporation of such rights into the electronic distribution ofcontent. In this way, specialist companies will strive through buyingbandwidth of transmission capacity and adding value by attractingcustomers seeking said companies' accessible content.

Bandwidth rights are necessary as an improvement over the art. TheINTERNET currently dominates any discussion of digital distribution. TheINTERNET is built over lines or pipes. It is an important observationthat a) these pipes cost money to build, deploy and maintain, and b) theowners of the pipes must pay for their investment and earn some return,which is their motivation for building the infrastructure. The means bywhich files are transferred over the World Wide Web, the most mainstreamsegment of the INTERNET, is the use and interpretation of HypertextMark-up Language (HTML) and embedded URLs (Uniform Resource Locators)which is designed to “alias” and designate a single path between theparty that is viewing a reference of a file and the underlying file. Theuser is unnecessarily “connected” to the actual file, which is called“aliasing,” and has effectively created more network traffic and thuswasted bandwidth. This shortfall in HTML is affecting the INTERNETthrough inefficiencies resultant from the underlying connection-basedTCP/IP protocol. In short, a lot of needless, bandwidth-wastingconnections are continuously being created and destroyed. The currentmechanics of the INTERNET will not be conducive to electronic commerce,and must necessarily change. This fundamental aspect of splittingcontent from references to that content is amply addressed in U.S. Pat.No. 5,428,606.

The biggest problem can be summed up by observing that users of theINTERNET generally live under the misconception that data or content is,or should be, free. Although one can find specific instances of goodsand services sold over the INTERNET, even downloadable software, thebasic mechanism that underlies the sale is subject to this “fallacy ofthe free.” There are actually many hidden costs, some of which werediscussed above. As for the content creator or publisher of said works,monitoring of sites and legal enforcement of copyrights is stillsignificantly difficult without better education of consumers and siteadministrators, as well as a means for detecting unauthorized copies onan archive as disclosed in the digital watermark filings. Recent legalactions against parties that distribute copyrighted music titles andgame software has resulted in setting a “for price” trend that can bemade more efficient by the present invention.

The present invention deals with creating a coherent pricing model foron-line distribution, which accounts for bandwidth utilization,maximizes pricing options and efficiency for sellers and buyers, and,additionally, as a result of the process of trading and pricing of thebandwidth options, ensures that usage of the limited bandwidth isorderly. All orders result from requests filled and thus are generally afunction of the price of the so-called option on bandwidth. The presentinvention also presents improvements over exchanges that exist for thepurpose of trading commodities such as stocks, bonds and other suchsecurities. The distinctive feature of the preferred embodimentdescribed below is the nature of the commodities being traded,bandwidth, and the unbounded potential of derivative copies ofcopyrighted works.

In current trading mechanisms NASDAQ (National Association of SecuritiesDealers Automated Quote system) is a well-known model. Looking atdetails of the NASDAQ market will illuminate exchange operations and thepresent invention's improvements over the present art for both marketexchange mechanisms and implementations of a content-based system thatmonitors copyrights and optimizes the distribution of the underlyingcontent.

The NASDAQ Market

NASDAQ is an exchange that trades in a finite number of “titles” orstock certificates, whereas the present invention is concerned with thepotential of an infinite number of “titles” made up of digital bits—eachderivative copy having the same potential commercial value as theoriginal master copy that was intended for trade. The limited or finitecommodity in question on a DICE exchange is available bandwidth for theactual transmission and thus delivery of a demanded, digitized “piece”of content (audio clip, picture, video, virtual reality, software,etc.). Bandwidth is characterized by the pipes that connect buyers andsellers of digital information and include POTs, cable, fiber optic,ISDN, satellite, electric power lines, etc. On the other hand, NASDAQdeals with basic stock securities, publicly-traded shares in companies.There are a small number of derivative securities traded, notablywarrants, but the mechanisms for supporting a particular security arefairly uniform. NASDAQ is primarily an electronic bulletin board wheremarket makers advertise at what prices they are willing to buy and sella particular security. These market makers maintain an inventory oftradeable securities for sale to other parties, whether agency orprincipal-based transactions. A market maker does not necessarily equala broker, although a market maker can also be a broker. Both marketmakers and brokers can participate in the system, but market makers arethe heart of it. A market maker is a paying member of the NASD (NationalAssociation of Securities Dealers). In effect, they own a stake in themarket governing body, and agree to be obligated to buy or sell acertain minimal amount of shares, in order to provide liquidity in themarket “Confidence” in the market mechanism, that is NASDAQ itself, isin the best interests of the participants or the ultimate buyers ofsecurities will not be willing to bid on securities at uncompetitiveprices. Similarly, an artist wishing to sell their commercially-valuablecopyrighted content, must be relatively confident that each derivative,perfect digital copy, has some mechanism for identifying the initialpurchaser and give all subsequent market participants a way of ensuringthe copy of the content they possess is not an illicit or unauthorizedcopy. Previously discussed disclosures on digital watermarks cover theseissues as a means to bring more artists and publishers into the digitalmarketplace to increase activity and liquidity.

Like the “specialists” on the NYSE (New York Stock Exchange), NASDAQmarket makers earn a profit on the spread between the BUY and SELL priceof a stock, assuming they can buy low and sell high (or short high andbuy low). Market makers risk their own capital, trading a group ofstocks, and can generally make profits trading shares for incrementalprofits. Such an instance would be selling at 10 and buying at 9⅞. Manymarket makers trade the same stocks competitively, and in general, themore firms that make a market in a given stock, the more liquid thetrading of that stock is, simply because there are more ready buyers andsellers. Again as a means to describe the present invention someunderstanding of these market participants may be required inimplementing the proposed system.

Although NASDAQ can be thought of as an “electronic” market, it iselectronic, for the most part, only in the sense that instead ofshouting across a floor at each other, traders generally advertise theirprice levels on a BBS (Bulletin Board System), which legally binds themto honor the price. They then field phone calls from traders at othermember firms, who have seen the advertisements on the BBS, and agree totrades over the phone. Then, each side enters their transaction (if oneside is a BUY, the other is a SELL) into on-site computers, which allfeed into central mainframes and link up with each other. Many errorsare introduced by this process, and an error report is produced at theend of the day, to be settled among the parties involved throughafter-hours reporting. So, there is really still a large low-techcomponent to NASDAQ which leads to discrepancies and inefficiencies.

The general public interacts with the market through brokers, who mightalso happen to work for a member firm. The chain of contact isindividual to broker to trader, with traders interacting among eachother, and filling orders for brokers. This also touches the issues ofprimary and secondary markets. When a stock goes public, called an IPO(Initial Public Offering), shares are bought up by a syndicate of marketmakers. This is the primary market. The proceeds of the IPO go to theissuing company, minus the underwriting fees, which are divided amongthe syndicate. The syndicate then sells shares to the public throughbrokers, and any other traders who want to trade them. The syndicate mayprofit again by selling the shares at higher prices than the originalpurchase price. This trading continues indefinitely or until bankruptcy.This is the secondary market. Prices in the secondary market can varycontinuously and widely from the price set in the primary market.

Having summarized the system, we can discuss some of the inefficienciesand idiosyncrasies of NASDAQ to establish the parameters of the presentinvention in the preferred embodiment

One major problem is the uniform distribution of information.Theoretically, all traders should get the same information at the sametime. However, NASDAQ does not accomplish this well. Since there areintermediate “concentrators” between the terminals and the hub, andspecific terminals tend to watch specific groups of stocks, some ofwhich may be significantly more active than others, generating a largervolume of information per second, which can cause backups, in general,the system is plagued by delays of an intermittent and non-uniformlydistributed nature. There is no mechanism for detecting these problems,which may cause the display of old or incorrect prices for some stocks,and delay the dissemination of electronic orders on an unequal basis.Traders generally have several sources of information, and need to be“on their feet”, so the burden of detection is, in effect, placed onhumans. NASDAQ terminals do maintain a “heartbeat.” If the terminalcannot get a response from the hub for a prescribed period of time, aproblem is signaled by turning the screen a uniform yellow on black.However, most significant information delays do not trip this mechanism.Market makers have cooperated to run independent tests, and are wellaware that one trader may see information up to several minutes beforeanother. There is no aging of information. The present inventionpartially concerns itself with information aging as content can betime-sensitive, and up-to-date bandwidth rights pricing is important.Such instances include news reports, live broadcasts, initial “be first”demand for a particular piece of media content, and the like.

A NASDAQ hub may send out information to all routes simultaneously, butthere can be large delays before it arrives at the destination. Anexample of a timing performance protocol, which can be employed tocounter such problems, is NTP (Network Time Protocol) on UNIX networks.NTP does advanced diagnosis of point-to-point network performance toforecast timing delays between pairs of machines. It is used with timecritical applications, but not widely so, as it is still consideredquite esoteric. NASDAQ makes no use of such protocols. For moretrustworthy information about bandwidth rights and the aging of a mediacontent good, the present invention takes into account forecasted timingdelays for pricing the subsequent bandwidth right as an overallcomponent of the pricing of the media content being demanded, and delaysin actually distributing this information. This is an improvement overthe art as it is a more appropriate aspect of pricing media versusdisseminating stock price information.

Before considering the present invention's clearing operations, whichare vital to simplifying the otherwise tremendous task of figuring outwho owes what to whom at the end of the day, a description of the art, ala NASDAQ, is required. Basically, clearing is the matching up oftrades. If one side reports a SELL, and the other a BUY, these two sidesmust be put together to form a trade which results in the transfer ofmoney to the seller, and the transfer of the security to a buyer. Anyhalves of trades that do not match are kicked back to the member firmwho entered them, for resolution. Provided the trade is resolved, bothsides again enter their sides, only late. The securities can be held instreet name, meaning the brokerage house can hold the physical sharesfor the buyer. However, the task of transferring stock certificates andcash among brokerage houses is onerous. Instead, a special holdingorganization was created. This organization is independent of the stockexchanges, but works with their clearing computers. The holdingorganization maintains vaults filled with stock certificates, held forthe brokerages, which in turn hold the stock in the names of theirclients. Everyone maintains records of who owns what relative to theirown organization. Should an owner actually request their certificates,they can be removed from the vault and delivered by way of the brokeragefirm. At the end of a day's trading, the hub computers at each exchange(whether NASDAQ or NYSE) net out the differences among the member firms,in cash and stock, over many trades, and produce a report of who oweswhat to who, in net terms, relative to each stock. The firms have acertain number of days to settle the trades (which allows for correctionof errors, and transfer of funds). This allows a single day to result inone transaction for each trading firm for each stock it trades. Thissort of clearing is key to the efficiency of any trading system. Withthe exception of a certificate delivery request, no securitycertificates need be moved, and cash can be transferred by wire.

Defining the Value of Bandwidth Rights

It is an object of this invention to create a trading instrument whichwill break bandwidth resources into discrete, usable component pieces,and allow an electronic market system to set a price for this scarcecommodity which sets an equilibrium level of supply and demand. The neteffect of this instrument, and its trading system, will be toefficiently apportion bandwidth to users who wish to download or uploadvaluable information, in whatever form it takes. Bandwidth affects thespeed of information transfer. If more bandwidth is used, speedincreases, and the transfer is accomplished in less time. If anindividual instance of this instrument is a bandwidth right, it can beobserved that several factors will affect its value:

Intrinsic Value

This value is measured versus a minimal standard telecommunicationscost. If there is a single underlying telecommunications cost to theowner of the right of X dollars per minute, let min 0 represent thenumber of minutes it takes to download the information using the minimalbandwidth, and mini represent the number of minutes to transfer theinformation at the bandwidth represented by this right. Note thatmin0>=min1.

Then the intrinsic value VI=X×(min0−min1), or the amount of money savedin telecom costs at the higher bandwidth. The intrinsic value can benegative, which would imply a compensating premium placed on the timesaved by using the more expensive transport.

Percentage Chance of Failure

This probability recognizes the generally unreliable nature of thecurrent telecommunications and transmission mediums as well asunderlying computer systems. Rather than be burdened with the task ofsolving all of the “bugs” in a given piece of commercial software, itwould be better to account for failure in the valuation. This valuecould be adjusted over time, as the failure probability of a systembecomes more apparent, or changes. In short, this represents thepercentage chance a user cannot exercise their right. It affects theexpected value of the right. In this baseline approach, if theprobability of failure is P_(f), where 0<=P_(f)<=1, and the value of theright is V₀, in the absence of failure, then V_(f)=(1−P_(f))V₀.

Convenience Premium

This represents some premium, V_(C) that a person is willing to pay totransfer their information within a specified period of time (i.e. “now”or “in the next 10 minutes”). This premium is likely to come out as themarket sets the price for a right. If there is a formula for what theprice should be, then the premium is simply the difference between theresult of that formula, and the actual market price. This reallymeasures the balance between supply and demand. The more demand inexcess of supply, the higher C will rise. V_(C) is then a function ofsupply and demand.

Vreal=Vtheoretical+VC

Time Value

This is a function of the exercise period of the bandwidth right. It isproportional to P_(f), since more time allows for recovery from anindividual failure to transfer. There are two components of time, overwhat period a transfer can be initiated and for how long the transfercan last once it is initiated. Note that this is made more complex bycongestion factors. For instance, if a user has a right for 10,000 kbpsfor 10 seconds, and the user wants to transfer 100,000 kb, it is notlikely that the transfer can be done in exactly 10 seconds. Protocoloverhead and congestion will add some increment of time. It is advisableto leave room in the exercise period for these factors, rather thantrying to value the time value in some manner which accounts for thesetransient conditions. Thus:

V=(1−P _(f))(V _(I) +V _(T) +V _(C))

or

V=(1−P _(f))((X(min₀−min₁)+V _(T))+V _(C)

The convenience premium, V_(C), should be independent of all othervalues (except V).

The equation behaves as such:

With increased failure probability decreasing rights value, independentof other variables, while increased demand relative to supply woulddrive up V_(C). We might try to compute V_(C) by accounting for knowndemand and supply values, and in fact, it is of vital importance to knowthe supply, and to allocate it so that any right issued can be exercisedwithin its exercise period.

Additionally, it is observed that a method is needed to allocate supplybased on demand which accounts for unused rights. In other words, thesystem needs to over allocate supply to some degree, knowing that somerights may go unexercised, so that demand is filled as much as possible.This is similar to airlines' practice of overbooking flights.

Some mechanism must be in place to prevent attacks on the system, by aparty, who, in effect, tries to corner the market in bandwidth, with nointention of using it, so that it goes unused. Naively, one would thinkthat since one has to pay for the bandwidth, why would someone want tocorner the market? Although bandwidth is not free, it should onlycomprise a small fraction of the value of the information to betransferred, and so this is not an unthinkable situation. The likeliestpreventive measure is the existence of competition in transmission.

Another option is the potential need to necessitate a secondary marketfor the trading of bandwidth, which could be divided up by a tradingsyndicate, and traded on a secondary basis to users. In a manner ofoperations, telecommunications companies perform this role betweennational telecommunications systems to facilitate international phoneusage. But the difference with the system envisioned in the presentsystem is that “any” user could buy bandwidth rights at times of lowdemand, and hope to sell them at a profit in times of higher demand.This would seem to imply the exchange itself should do some proprietarytrading in this manner, both to profit, and to ensure some bandwidth isavailable for sale to users when they need it. This will have a purposeto serve in making the market efficient in the future.

Bandwidth rights instruments are likely to be highly localized tospecific subnets. Especially since certain types of connections may beavailable only from certain exchanges, and since failure probabilitiesare likely to vary with specific hardware, operating systems, andservice providers. Additionally, the basic valuation equations above donot address telecommunications costs across various types of lines. Thisproblem at least, might be solved by active maintenance of cost tables,designation codes for types of lines, and the designation of a low coststandard. The problem of moving rights between exchanges is made moredifficult since supply/demand planning for one exchange will nottranslate to another, unless some means for interconnecting exchanges isdeveloped, and exchange bandwidth planning is global. The race by manyparties to link users to the INTERNET via varying access links (modem)including ISDN, POTs, cable, may further the need for common bandwidthpricing. What is clear is that the basic structure of the presentinvention would facilitate such planning to the benefit of all marketparticipants: telecoms providers, INTERNET access companies, users andpublishers as well as more general aggregators of content and bandwidthsuch as, phone companies, cable companies and satellite companiesintending on providing services across multifarious line types.

Bandwidth Rights Accounting and Clearing

If a bandwidth right is securitized, the creation and supply ofcertificates, made unique by cryptographic methods to manage them, willalso be necessary. Transferring certificates between individuals iscomplicated and unnecessary. Following the general principles of thesecurities clearing model described above seems to be in order. In thiscase, the exchange needs to create and manage an account for each partythat can own or trade bandwidth rights. Additionally, a method forauthenticating the party is required. With these two elements, a tradingmarket can be implemented by the following methods:

The exchange creates and manages a supply of uniquely distinguishedbandwidth rights certificates. These certificates are good for aspecific period only. They may be traded over the course of time,anywhere from the moment they are created to the expiration time. It isquestionable whether a right should be exercisable once it is clear thateven if a transfer is initiated, it cannot be completed given that rightonly. However, consider that the right is usable, but its valuedecreases rapidly as it approaches expiration (i.e. value is based ontime left, not total transfer time). Once a certificate is expired it isdeleted. Hash values incorporating a time-stamp could be used toserialize certificates. Such a cryptographic method is well noted in theart. U.S. Pat. Nos. 5,136,646 and 5,136,647 (“Digital DocumentTime-Stamping With Catenate Certificate” and “Method For SecureTime-Stamping Of Digital Documents” respectively) describe methods forcryptographic time-stamping.

The exchange creates a central hub for planning bandwidth supply,accounting, and disseminating pricing information. Client-side softwarewill value the rights relative to a particular user's needs, and used byany party trading rights. A seller creates a SELL advertisement, whichis entered into the “exchange”. The exchange verifies the selleractually holds the right in their account. A buyer then enters a BUYoffer against the sell advertisement. The exchange validates the buyers,and then clears the transaction, transferring money from the buyer'spayment method (credit card, etc.) to the seller's account, and theright to the buyer's account. The unbundled right may be soinfinitesimal that the actual cost of the right must be bundled with theunderlying content or information being sought. The rights could also bebound to underlying titles. This may be similar to attaching salestaxes, handling charges, and credit card use charges that are typicallybundled with the cost of a given physical goods purchase.

Multichannel Watermarking Mechanisms and Techniques

One problem with the digital watermark systems is the need for amechanism by which multiple parties may add watermarks to a given pieceof content at different stages of distribution, without any one partyneeding to comprise the security of its watermarks to any other party.Although an “exchange” system allows for two-way communication, aparticular “distribution path,” may be taken to be the path by which apackage of data travels from a source party to a destination party. So,a distribution may be a single side of an “exchange”. In this context,it is useful to speak of parties to the distribution as “upstream” or“downstream” in relation to each other. The initial source would befarthest upstream, while the ultimate destination party would befarthest downstream, with any number of parties along points in themiddle. If the data in a distribution flows from party A, through partyB, to party C, then:

party A is upstream from parties B and C;party B is downstream from party A, but upstream from party C;and party C is downstream from parties A and B.

The above example should make clear the relationships between upstreamand downstream parties.

It is a useful goal, and an accomplishment of embodiments of the presentinvention, to provide a mechanism and technique for the purpose ofallowing any party to the distribution to add at least one channel ofwatermark information, which exists separately and is secured by meansof a separate key, to the data of the distribution in such a manner asto ensure that one or more watermarks of the other parties to thedistribution remain present in the data when it reaches its finaldestination.

A significant improvement over traditional metering systems is thatexchange mechanisms are beneficially tied into content for morerealistic metering of playing or recording content. With multichanneldigital watermarks, a more robust means for metering content is madepossible by parties not willing to create expensive proprietarydistribution channels, but who do wish to capitalize on selling contentin the economic method of metering. There are two immediately apparentschemes which might accomplish this. This first is described as a“passive” scheme and the second is described as an “active” scheme.

In a passive scheme, several assumptions must be decided and jointlyagreed upon beforehand by all parties who wish to add watermarks. Basedupon the total number of watermark channels to be used, where each partythat wants to add a watermark is assumed to use at least one watermarkchannel, and the amount of data, and the desired minimal level ofwatermark security, a watermark system could encode watermarks at anappropriate sparsity such that random chance will cause some watermarksadded by downstream parties to obliterate watermarks added by upstreamparties. But by the same token, random chance will allow some of thewatermarks of upstream parties to survive the encoding of watermarks bydownstream parties by virtue of the fact that such watermarks do notoccupy enough of the same data space to cause one to significantlyinterfere with the reading of another. The end result is that at leastone watermark added by each party will be readable at the finaldestination. While such a passive scheme is appealing because of itsrelative simplicity, in which each party can add watermarks withoutconsidering the impact of any other party, once some initial parametersare set, this type of scheme requires a lot of testing to determineoptimal settings given various initial conditions, and does notguarantee any particular level of watermark redundancy. It is quitehaphazard, although technically feasible.

According to an advantageous embodiment of the present invention, anactive scheme is implemented which is described as follows. The farthestparty upstream, who presumably controls the ultimate copyrights anddistribution rights of the data generates two keys. The first key is aregular watermark key, as described in previous related patentapplication disclosures by The DICE Company, particularly, including the“Method for Stega-Cipher Protection of Computer Code” application. Thiskey is used for actual encoding and decoding of information from thewatermark channel “owned” by this party. The second key is a new type ofwatermark key, called a master framework key, which dictates

how the entire data stream in general is to be packetized;how the data stream packets are to be allocated among a predeterminednumber of reserved watermark channels; andhow the channels are to be assigned to downstream parties.

This information is the minimal amount of information which must beshared with downstream parties to enable them to add watermarks usingtheir own regular watermark keys to their assigned channels. Notice thatwithin a given channel, another key is still needed to extract awatermark. Therefore, while some information is potentially leaked, thewatermarks are still secure. The master framework key, in effect,creates several virtual data streams within the real data stream, eachof which can be accessed separately by the watermark system. The masterframework key can then be shared on a limited or protected basis withonly those downstream parties who the upstream party chooses toparticipate in the distribution. Such master keys could be distributedusing well-known cryptographic art for key transmission. Each downstreamparty is responsible for generating their own regular watermark key, andwatermarking their assigned channel with appropriately generatedinformation using the combination of the master framework key and theregular watermark key, as the data is received and forwarded. Thisactive scheme is much better than the passive scheme, since it ensuresthat watermarks added by downstream parties do not interfere in any waywith those added by upstream parties, thus guaranteeing a maximal levelof watermark redundancy, which is desirable, while minimizing thedisclosure of watermark information necessary to downstream parties,which is undesirable. It is envisioned that systems that use a hybridapproach, incorporating some mechanisms and methods of the activescheme, but also relying on some methods of the passive scheme may bedeveloped.

Keysearch Optimization Mechanisms and Techniques

Another issue of digital watermark system which must be adequatelyaddressed is key search. When a suspect copy of content is obtained, theamount of work done to extract watermark information from the copy isbounded by the set of watermark keys which are potential candidateswhich may have been used to encode the hypothetical watermark(s) in thesuspect data. It is an object of the invention described herein tominimize the amount of work and hence time required to search this setof keys, or keyspace, while ensuring confidence that all potentialcandidate keys have been searched, or at least those candidates with asignificant probability of constituting the actual target of the search.

The watermark decode operation proceeds generally as follows: First acandidate key search group is generated, then a decode process is runusing each candidate key until either all keys are exhausted and nowatermark is extracted, or a watermark is extracted using a candidatekey. Depending on the nature of the information in the extractedwatermark, the search might continue with remaining keys, or terminate.One obvious method for improvement is to perform parallel searchestrying multiple keys at the same time. Using powerful parallel hardware,real gains may be obtained using this method simply.

On slower, serial CPU-based hardware, real parallel gains are moredifficult to make. However, using dynamic programming techniques andintelligent search scoring and management, one could configure thesearch engine to start with several or all keys, checking each packet ofdata against each key before proceeding. As each iteration is completed,factoring in the next data packet, cumulative “scores” for the resultsof each key may be computed and compared. Keys which appear to have morepotential to ultimately yield a match and extract a watermark continueto be used in the process, while those with lower potential, as measuredby score, are dropped from the process. This process has an attractivecharacteristic that it gets faster as more keys are progressivelyeliminated from the search space, and can consider a large number ofkeys. Its drawback, in the absence of other techniques, is that theinitial key space may be very large, and it may take considerable timeto narrow the search keys to the point where the search proceeds at areasonably fast pace. It is also possible that the process of finding amatch does not score in a monotonically increasing manner, resulting inthe early elimination of the correct key. In other words, scores may getworse before they get better.

Without considering any information about the source copy used togenerate the suspect copy, one could limit the search work done byimposing a limit on how much time a decoder can spend checking dataversus a particular key, or a maximal percentage, or number of packetsof the copy to process before giving up on a given key. One could dowell with a heuristic rule that says, “if I have checked 50% of therecording without finding a watermark, then in all likelihood I will notfind a watermark in the other 50% of the recording with this particularkey”, for instance. However, the best gains can be made by eliminatingas many keys as possible from the initial search pool. In order to dothis the keys are expanded to included several items of informationregarding the source copy or master that was watermarked using the keyin question. This information includes any of the following items:

-   -   Title, Artist, Date, size of recording, format of the recording,        quality of the recording

and may also include mathematically calculated properties of therecording which can identify the recording to some significant degree ofprobability while using only a small amount of data (i.e. localized hashvalues, etc.). When a suspect copy is obtained, this same set ofinformation describing the suspect copy is generated by the decodersystem, which can then select a set of candidate keys which match to adesired degree, any or all the criteria stored with the keys.

Finally, the best potential results may be obtained by taking advantageof the multiple access levels made possible by the watermark systemdescribed in previous filings. A watermark embedded in a higher privacychannel corresponds with a particular key. Every key has a uniqueidentification which allows the key custodian to find the key in adatabase, but provides no information on the key itself. Thisidentification may have no meaning outside the custodial system. If thehigher privacy key identification is included in a lower privacywatermark such as a protected or public watermark, then the partysearching for the higher privacy watermark makes use an intentionallylimited set of lower privacy keys to first extract the keyidentification of the higher privacy key. At this point, no additionalkey search is necessary, a significant time savings. This assumes thelower privacy watermark has not somehow been removed from the digitalsample stream.

An embodiment of the decoder key search system would encode private keyidentifiers in lower privacy watermarks and uses descriptive informationin the keys to compare versus the suspect copy to narrow the key searchspace. This embodiment makes use of parallel hardware to facilitate asmuch gain as possible from parallel search techniques described above,including progressive elimination of keys which appear to diverge from amatch as the comparison progresses.

In an exchange mechanism according to an embodiment of the presentinvention, the exchange is not the source of any of the sought-afterworks or digital information packages (DIPs). The exchange is ultimatelymeasured by available transmission resources. Whereas DIPs are measuredin a digitization system, the size of the underlying data file, its filestructure, which dictates any potential compression and buffering, anddata overhead for error correction, will provide exchange participantswith an estimate for the resources, including time required todistribute said DIP. Given the heterogeneous nature of existing andproposed line infrastructure, any DIP can potentially be exchanged overvastly different lines between points. These may include copper,coaxial, fiber optic, etc. Distribution of a given DIP may occur ondifferent lines for the same work (say for instances of a work availableover POTs and satellite, etc.) or over a number of different media inthe distribution of a work as it is transmitted over a network with aplurality of transmission media (say, the backbone of the network may befiber but the end loop is coax, etc.). Given the existence of othertraffic over these lines, including telephony, the pricing of a givenDIP should necessarily include the price of the bandwidth resourcesnecessary to transfer the DIP between at least two parties. Aspreviously discussed, the difference in this embodiment and systems suchas video-on-demand or proprietary cable and satellite systems is thenecessity to value bandwidth between points in a network to facilitatethe exchange of a demanded work at a given instant in time notcontinuously as with traditional “subscriber models.” Similarly,“time-share” systems are oriented around selling a parcel of time tousers seeking “processor” access to perform some activity, while,bandwidth is not the commodity being bid, time shares are reservationsystems not capable of bidirectional or end-to-end “negotiation” ofresources to facilitate the exchange of a DIP in real or next-to-realtime. Further, the preferred embodiment differs in that all participantsmay have significantly different access infrastructure (differingmodems, cable, electric powerline, satellite, etc.) and pricingpreferences given demand for a particular DIP.

The price of the bandwidth resources is, thus, proportional to thepercentage of bandwidth allocated to the transfer of the DIP andinversely proportional to the duration of the transfer. With thesefactors, the aggregate of available bandwidth must change with time andcan appropriately be priced given the demand of certain DIPs orpublishers seeking to effectively distribute DIPs. Bandwidth allocationcan then be securitized to reflect the varying needs of marketparticipants to exchange DIPs. How this security is priced relates tothe nature of the underlying DIP which is most likely a luxury item suchas a musical recording or video game. The securities must then tradeindependently of the DIPs and are based in part on a conveniencepremium, given demand for bandwidth allocation at any given time.Additionally, network resources as measured by present digital packetswitches provide the variable of “supply of bandwidth resources” andestimated demand for said resources at a given time. For networks thatare more centralized, such as cable or satellite, estimating bandwidthresources may actually be far easier as traffic is generally downstreamto customers not bidirectional like telephone networks. Further meansfor computing bandwidth securitization instruments take intoconsideration probability of failure to exercise an instrument, the timeperiod for which said instrument is valid, intrinsic value relative tominimum standard bandwidth utilization for the line in question. Thesefactors, when coupled with a convenience premium, are improvements overthe prior art as described in the U.S. Pat. No. 5,428,606. Bidirectionalexchange of content by parties who can be both subscribers or publishersor both, are possible when the party wishing to sell content or DIPs canset distribution, pricing, and other informational fields at itsdiscretion. These issues are well documented in U.S. Pat. No. 5,428,606and are increasingly important in the growing popularity of the WorldWide Web (WWW) portion of the INTERNET. But, given that the marketplacein which digital goods can be traded digitally is itself digital, theevident or potential scarcity of bandwidth or the ability to valueexisting bandwidth given a commercial market for digital goods exchangeis invaluable.

Further, security of the content and records of said content can befurther described as an improvement over methods to undeniably identifycontent through the use of digital watermarks and other similartechnologies. It is desirable to take appropriate measures to protect asmany parties as possible in the transaction of a copyrighted work. Theseparties may include the copyright holder, publisher, distributor,retailer, and consumer. As with the physical monitoring of mediaproducts such as CDs, where physical checks are conducted by the label,manufacturer, distributor, retailer and even outside parties such asSoundScan, Billboard, etc. the digital domain contains far less meansfor “hands-on” metering without including watermarks as “securedidentification” for parties involved in the distribution chain. As apreferred embodiment of the present invention, a record of a given DIPshould include at least two of any of the following three elements: adigital watermark key, a DIP header, and a bandwidth securitizationinstrument (bandwidth right). The DIP header describes the content, itsaddress, pricing, and distribution. The bandwidth right is unique in itsinstance but also varies according to network bandwidth availability fora given period of time and the duration of the actual use of bandwidthon said network.

Optimizing key searches and increased use of multichannel digitalwatermarks are delineated in the discussions that follow this preferredembodiment as they are additional improvements over the art. Theembodiment thus far discussed makes possible a more “democratically” or“economically” feasible market for the exchange of digital goods. Withbandwidth rights, multichannel watermarking, optimized key searches,content-base metering, it will be possible to more fully replicateretail and wholesale environments as they exist in the physical world.Decisions about depth and breadth of services and goods that can beoffered by on-line market participants will differ only in the abilityto offer access to archives (POTs, cable, satellite, wireless, etc.)which will be determined by pricing and speed of transmission as well asby content providers interested in tapping into the potentialdistribution market that the pipe owner's network includes. Marketparticipants will also be able to appeal to the anonymous parties thatseek content through attractiveness of a “site,” amount of processingspeed available for distributing digital goods, staff responsible forpurchasing or creating available content for downloads, the number ofavailable repurchase rights of copyrighted works: “electronicwindow-shopping” can be realized given heterogeneous networks, manydigital goods, and the creation of bandwidth rights to complementdigital watermarking systems. Simply, content can better be valued giventhe infrastructure of the digital domain while recognizing/he importanceof tracking and monitoring the exchange of digital goods.

While the discussion above has described the invention and its usewithin specific embodiments, it should be clear to those skilled in theart that numerous modifications may be made to the above withoutdeparting from the spirit of the invention, and that the scope of theabove invention is to be limited only by the claims appended hereto.

1-106. (canceled)
 107. A method for decoding digital watermarks, themethod comprising the steps of: receiving a content signal imperceptiblyencoded with at least one digital watermark; and decoding the at leastone digital watermark from the imperceptibly encoded content signalwherein said decoding limits the ability to reverse the encoding. 108.The method of claim 107, wherein the step of decoding is associated withat least one key.
 109. The method of claim 107, wherein the step ofdecoding enables upgrades.
 110. The method of claim 107, wherein thestep of decoding can verify at least one of a plurality of digitalwatermarks.
 111. The method of claim 107, wherein at least one of aplurality of digital watermarks is accessible based on accessprivileges.
 112. The method of claim 107, wherein said decoding isimplemented in one or more of the following: search agents; viruses;archive scanners; hardware; machine-readable code; and, software. 113.The method of claim 107, wherein said at least one digital watermarkcomprises one or a plurality of the following: title identification;unit measure; unit price; percentage transfer threshold at whichliability is incurred to purchaser; percent of content transferred;authorized purchaser identification; seller account identification;payment means identification; digitally signed information from senderindicating percent of content transferred; digitally signed informationfrom receiver indicating percent of content received; upgradeinformation; serialization information; trusted information; ownershipinformation; audit trail information; content metering information;transaction information; combinations thereof.
 114. The method of claim107, wherein the at least one digital watermark represents references toat least one of the information of claim
 113. 115. A method for decodingdigital watermarks, the method comprising the steps of: receiving acontent signal imperceptibly encoded by a watermarking technique with atleast one digital watermark; and decoding the at least one digitalwatermark from the encoded content signal wherein the step of decodinglimits tampering of at least one digital watermark.
 116. The method ofclaim 115, wherein the step of decoding is associated with at least onekey.
 117. The method of claim 115, wherein the step of decoding enablesupgrades.
 118. The method of claim 115, wherein the step of decoding canverify at least one of a plurality of digital watermarks.
 119. Themethod of claim 115, wherein at least one of a plurality of digitalwatermarks is accessible based on access privileges.
 120. The method ofclaim 115, wherein said decoding is implemented in one or more of thefollowing: search agents; viruses; archive scanners; hardware;machine-readable code; and, software.
 121. The method of claim 115,wherein said at least one digital watermark comprises one or a pluralityof the following: title identification; unit measure; unit price;percentage transfer threshold at which liability is incurred topurchaser; percent of content transferred; authorized purchaseridentification; seller account identification; payment meansidentification; digitally signed information from sender indicatingpercent of content transferred; digitally signed information fromreceiver indicating percent of content received; upgrade information;serialization information; trusted information; ownership information;audit trail information; content metering information; transactioninformation; combinations thereof. 122.-127. (canceled)
 128. A systemfor watermarking at least one content signal, the system comprising: adigital watermark encoder; and a digital watermark decoder; the digitalwatermark decoder configured to verify the presence of at least onedigital watermark.
 129. The digital watermarking system of claim 128,wherein said digital watermark encoder comprises a first softwareprogram, and said digital watermark decoder comprises a second softwareprogram, said first program being independent of said second program.130. The digital watermarking system of claim 128, wherein said digitalwatermark encoder comprises a first hardware device and said digitalwatermark decoder comprises a second hardware device, said firsthardware device being separate from said second hardware device. 131.The digital watermarking system of claim 128, wherein the digitalwatermark encoder is capable of encoding a digital watermark using awatermarking key.
 132. The digital watermarking system of claim 128,wherein the digital watermark decoder comprises a software decoding keyfor detecting a plurality of digital watermarks that have been encodedwithin a content signal.
 133. The digital watermarking system of claim128, wherein the digital watermark decoder comprises software embeddedin hardware that is programmed to search for any watermarks in any datathat is stored within a memory of the hardware.
 134. The digitalwatermarking system of claim 128, wherein the digital watermark decodercomprises a content distribution system that is programmed to search forany watermarks that might be embedded into a content signal.
 135. Thedigital watermarking system of claim 128, wherein the digital watermarkdecoder comprises a scanner that searches for any watermarks that mightbe embedded into the data being scanned. 136.-142. (canceled)
 143. Themethod of claim 115, wherein the at least one digital watermarkrepresents references to at least one of the information of claim 121.144. A device for decoding digital watermarks, the device comprising: areceiver for receiving at least one content signal imperceptibly encodedwith at least one imperceptible digital watermark; and a decoder fordecoding at least one imperceptible digital watermark from theimperceptibly encoded content signal wherein the device limits theability to reverse the encoding.
 145. The device according to claim 144,wherein said decoder includes a processor for processing keys.
 146. Thedevice according to claim 144, wherein said decoder upgrades saiddevice.
 147. The device according to claim 144, wherein said decoderverifies the presence of at least one of a plurality of digitalwatermarks.
 148. The device according to claim 144, wherein at least oneof a plurality of digital watermarks is accessible based on accessprivileges.
 149. The device according to claim 144, wherein said decoderis implemented in one or more of the following: a) search agents; b)viruses; c) archive scanners; and d) software.
 150. The device accordingto claim 144, wherein said digital watermark comprises one or aplurality of the following: a) title identification; b) unit measure; c)unit price; d) percentage transfer threshold at which liability isincurred to purchaser; e) percent of content transferred; f) authorizedpurchaser identification; g) seller account identification; h) paymentmeans identification; I) digitally signed information from senderindicating percent of content transferred; j) digitally signedinformation from receiver indicating percent of content received; or k)combinations thereof.
 151. The device according to claim 144, furthercomprising: a decoder for decoding at least a portion of the at leastone of the digital watermark from the imperceptibly encoded contentsignal.